The Horstmeyer Corporation commenced operations early in 2011. A number of expenditures were made during 2011 that were debited to one account called intangible asset. A recap of the $644,000 balance in this account at the end of 2011 is as follows:

The total purchase price of the Stiltz Corp. stock was debited to this account. The fair values of Stiltz Corp.'s assets and liabilities on the date of the purchase were as follows:

Required:
Prepare the necessary journal entries to clear the intangible asset account and to set up accounts for separate intangible assets, other types of assets, and expenses indicated by thetransactions.

Transcribed Image Text:

Date Transaction 2/3/11 State incorporation fees and legal costs related to organizing the corporation 7,000 3/1/11Fire insurance premium for three-year period Amount 6,000 20,000 40,000 3/15/11 Purchased a copyright 430/11 Research and development costs 6/15/11 Legal fees for filing a patent on a new product resulting from an R&D project 3,000 9/30/11 Legal fee for successful defense of patent developed above 10/13/11 Entered into a 10-year franchise agreement with franc Various Advertising cost 11/30/11 Purchase of all of the outstanding common stock of Stiltz Corp. 5,00,000 12,000 40,000 16,000 Total 644.000 Receivables Equipment Patent Total assets Note payable assumed- (2,20,000) Fair value of net assets S 3,80,000 $1,00,000 3,50,000 1,50,000 6,00,000